Transnet Freight Rail. Picture: ANDRE KRITZINGER.
Transnet Freight Rail. Picture: ANDRE KRITZINGER.

Transnet lost out on hundreds of millions of rand due to a controversial 2015 decision to swap interest fees on a multibillion-rand loan to finance the state-owned enterprise’s procurement of 1,064 locomotives.

Jonathan Bloom, an expert in financial risk management who was contracted by MNS Attorneys to assist their investigation into irregularities at Transnet, told the state capture inquiry on Wednesday that Transnet’s losses were close to R1bn.

Furthermore, it would cost Transnet almost double that to exit the deal.

By 2015 Transnet had entered into two massive loan agreements to pay for the trains, the procurement of which is in itself shrouded in fraud and corruption.

The first was with the Chinese Development Bank for about $1.5bn and another, referred to as a “club loan” between a syndicate of lenders, for about $1bn.

All the loan transactions were granted at floating rates. But soon after the money was received, Transnet treasurer and state capture-implicated Phetolo Ramosebudi said the floating interest rates on the club loan should be converted to fixed interest — a decision that came under fire at the time and has been one of the main focuses of the commission’s investigations into Transnet.

Bloom told the commission that as of May this year Transnet had lost R850,54m because of the interest swap on the club loan. He said it would cost Transnet an additional R1.8bn.

The commission will hear testimony of former group treasurer of Transnet Mathane Eveline Makgatho on Thursday.